TheChek News Flow

Palantir’s exorbitant valuation mixes mystery and mayhem

US data analytics group could live up to the hype

If 2024 was the year Nvidia ate the world, 2025 belongs to Palantir. The defence-focused data-crunching company was the best-performing stock in the S&P 500 last year, overtaking the giant chipmaker after November’s US election. In the last week alone, its shares have risen by one-third, to give it a market capitalisation of nearly $260bn. The company’s mission: “making America more lethal”.

Explosive share price rises and bombastic rhetoric are easy fodder for meme stock-weary investors. Palantir certainly has many of the hallmarks. Chief executive Alex Karp describes his products as “powerful as fnck”. A valuation of 50 times next year’s forecast sales is twice the highest multiple ever afforded Tesla, Alphabet or Nvidia as listed companies.

Even so, Palantir could live up to the hype. Underneath the brimstone and vengeance, Palantir has worked out how to corral companies’ sprawling data troves to make them more efficient. To commercial customers, Palantir is something valuable if prosaic: a consultant that sells software, or what UBS analysts call a “McKinsey-meets-Databricks”.

Strip away the braggadocio, and it’s easier to have a sane conversation about Palantir’s worth. Analysts at Morningstar think it could one day capture 3 per cent of a total market worth $1.6tn, implying revenue of nearly $50bn. On a multiple of 10 times sales, in line with software giant Microsoft, Palantir should — eventually — be worth $500bn.

The question for investors is how long it takes to get there. Today, Palantir’s annual revenue is just $2.9bn. That’s the same size Salesforce, another software revolutionary, was in 2013. Marc Benioff’s company managed to sustain a growth rate above 20 per cent for almost a decade, something few companies have matched. 

Yet even at this rapid clip, Palantir would fall short. Indeed, using a 10 per cent cost of capital to discount future cash flows, it’s as if investors are saying Palantir can hit that revenue of $50bn in six years — a staggering 60 per cent annual growth rate.

One thing Palantir has now that Salesforce didn’t is AI. Companies like Microsoft, Amazon and OpenAI have sunk billions of dollars into models Palantir engineers can use to get creative. It doesn’t hurt either that Karp and co-founder Peter Thiel have established a revolving door of contacts between their company and western governments.

Those are powerful assets. Even armed with both of them, Karp needs to produce growth his predecessors couldn’t have imagined in order to justify that valuation. If he can keep up his knack for fuelling corporate greed and government fear, Palantir has a fighting chance.

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Taiwanese contract manufacturer says it would consider a deal only as part of co-operation on electric vehicles

Foxconn will consider acquiring Renault’s stake in Nissan if it is a condition for working with either carmaker on electric vehicles, the Taiwanese contract electronics manufacturer said on Wednesday.

“We did have talks about acquiring a stake in [Nissan],” Foxconn chair Young Liu told reporters on Wednesday in the company’s first confirmation of the talks. “If [taking a stake] is necessary for co-operation, we will consider it, but buying shares is not our main goal. Our main goal is co-operation.”

Liu’s comments clarify Foxconn’s rationale for negotiating an investment in Nissan after the breakdown of takeover talks between Honda and Nissan revived the possibility of a deal with the Taiwanese group.

Best known for its role as the main contract manufacturer of Apple’s iPhone, Foxconn is building a business designing and manufacturing EVs for other companies to sell under their own brands.

While it has signed up some EV start-ups as customers, contract orders from either Renault or Nissan would be its first partnership with a traditional carmaker outside its home market of Taiwan.

Liu said he expected to announce such a co-operation deal within one or two months, and Renault, Nissan and Honda were among carmakers in talks with Foxconn about contract orders.

Nissan did not immediately respond to a request for comment. Its shares had fallen 6.3 per cent by the early afternoon in Tokyo on the news and are down almost 13 per cent so far this year.

The company has come under fierce pressure due to competition from China and after failing to capture the hybrid boom in the US. As part of a turnaround plan, it intends to cut 9,000 jobs and a fifth of its production capacity.

The failed talks with Honda — which would have created the world’s fourth-largest automotive group — were precipitated by Foxconn’s interest in Nissan, according to people familiar with the matter.

Renault has been reducing its holding in Nissan ever since a drastic restructuring of their long-standing alliance in 2023. It has a 36 per cent stake in the Japanese company and wants to offload 18.7 per cent currently held in a French trust.

Jun Seki, chief strategy officer for Foxconn’s EV division and a former Nissan executive, was reported to have met Renault chief Luca De Meo in December for talks about acquiring shares held in the trust, triggering panic within Nissan and the frantic negotiations with rival Honda.

The Financial Times reported last week that Renault had reactivated talks with Foxconn. However, Nissan has the first right of refusal if the French group does decide to sell its shares.

Nissan is also conducting its own search for a strategic partner in the tech industry following the collapse of merger talks with Honda.